Story Behind the Story

On August 31, the Union-Tribune printed an obituary on the death of Allard Roen, one of the original developers of Carlsbad’s La Costa Resort and Spa. He was living there when he died August 28 at age 87.

The U-T’s obituary was a typical, dutiful encomium. It did not mention the background of one of Roen’s major partners in La Costa and other projects, Moe Dalitz. He was among the 20th Century’s most notorious gangsters, as the Senate Special Committee to Investigate Organized Crime in Interstate Commerce, known as the Kefauver Committee, pointed out in 1950 and 1951. In fact, a book that is now a best seller, T.J. English’s Havana Nocturne, notes that Dalitz, then 47, attended the famed Havana Conference at Cuba’s Hotel Nacional in late December 1946. According to English, a select group of 22 dignitaries caucused to strategize the American mob’s plan to make Cuba a Western Hemisphere vice haven. The group included Giuseppe (Joe Bananas) Bonanno, Vito (Don Vito) Genovese, Meyer Lansky of Murder Inc. and the Bugs and Meyer Mob, Charles (Lucky) Luciano, Luciano’s sidekick and “Prime Minister of the Underworld” Frank Costello, Carlos Marcello, Santo Trafficante Jr., Joe Adonis, and Tony (Big Tuna) Accardo, former bodyguard for Al (Scarface) Capone and later head of the Chicago mob. The book points out that Dalitz had been a partner with Lansky in the Molaska Corporation.

Timothy L. O’Brien, author of Bad Bet: The Inside Story of the Glamour, Glitz, and Danger of America’s Gambling Industry, writes that Dalitz had run “the Cleveland branch of Charlie ‘Lucky’ Luciano and Meyer Lansky’s nascent Mafia.” Decades later, Dalitz was known as the caretaker “of underworld investments in Las Vegas.”

A Federal Bureau of Investigation official said in 1978, “The individual who oversees the operations of the La Cosa Nostra families in Las Vegas is Moe Dalitz,” according to James Neff’s Mobbed Up.

After Prohibition’s repeal knocked out his bootlegging business, Dalitz went into the illegal casino business in southern Ohio and Kentucky. He then became the Big Boss in Vegas, arranging casino financing from the mob-tainted Teamsters Central States, Southeast and Southwest Areas Pension Fund and keeping track of the books at such spas as the Desert Inn, where Roen was also a key figure. In the late 1940s, Dalitz resurrected crooner Frank Sinatra’s sagging career by giving him gigs at the Desert Inn.

Roen, who in the 1960s pleaded guilty in the United Dye and Chemical securities fraud, joined with Dalitz, Irwin Molasky, and Merv Adelson to build Las Vegas’s Sunrise Hospital with Teamster funds. They tapped Teamster funds for other investments. That Central States fund was essentially a piggy bank controlled by Jimmy Hoffa.

The fund played a key role in San Diego. It loaned $100 million to San Diego’s Irvin J. Kahn, a mobbed-up financier who used the money to develop Peñasquitos. He also got a concealed loan of $800,000 from a tiny Swiss bank named the Cosmos Bank, which made other mob-related loans before being closed up by joint action of the United States and Switzerland in the 1970s.

But the Central States Teamster fund’s big investment was La Costa. The interim loans were made by U.S. National Bank, controlled by C. Arnholt Smith, named “Mr. San Diego” by the Downtown Rotary Club and “Mr. San Diego of the Century” by a reporter for the San Diego Union. Following the interim loans, the Teamster fund would assume the U.S. National loans. There was a cozy relationship. Frank Fitzsimmons, who became head of the Teamsters after Jimmy Hoffa was exterminated, used to come down to watch the Smith-owned minor-league Padres play. And Fitzsimmons would play golf in San Diego with politician Richard Nixon.

The Union-Tribune’s recent panegyric to Roen mentioned that in 1975 Penthouse magazine ran an article charging that La Costa was a hangout for mobsters, and the founders sued for libel. Here’s how the U-T summed up the result: “A 10-year court battled ensued until La Costa accepted a written apology from the magazine.” This is a rank distortion. A joke.

“San Diego leadership has a tendency to fall in love with people with big bucks who come into town,” says Mike Aguirre, city attorney. The La Costa founders “were one of the first big-bucks boys who rode into town, and the welcome wagon was driven by C. Arnholt Smith.” The U-T then, and to this day, protects the roughriders who bring their sacks of money to San Diego.

Aguirre was one attorney representing Penthouse in the suit. He and his colleagues parsed every sentence in the article. The Penthouse trial lawyer rattled off to the jury the names of those who had shown up at La Costa, including Hoffa, Dalitz, Lansky, and many other hoods. And here is the key: the jury exonerated the magazine, agreeing that it had proved that everything it said was true.

It turned out that the judge, Kenneth Gale, had formerly been a lawyer for Jimmy “the Weasel” Fratianno, a notorious mob hit man who had begun cooperating with the government. Fratianno was to testify for Penthouse about the mobsters who habituated La Costa. Gale wouldn’t let the magazine’s lawyer question Fratianno. Judge Gale had also previously represented an infamous union racketeer, as related by Matt Potter in a 1999 Reader story.

After Gale threw out Penthouse’s victory, the magazine thought it could win a retrial, but after ten years and $8 million in legal expenses, Penthouse issued an innocuous statement, saying that it “did not mean to imply nor did it intend for its readers to believe that Messrs. Adelson and Molasky are or were members of organized crime or criminals” (italics mine). Note that Dalitz and Roen were not included in that statement. The magazine praised Dalitz and Roen for their “civic and philanthropic activities.”

Then La Costa owners lauded Penthouse for its “personal and professional awards.” It was a détente sans sincerity.

Dalitz died in 1989 at age 89, leaving a daughter in Rancho Santa Fe. She is involved in many peace and politically progressive activities. Her attorney was once San Diego’s James T. Waring, who didn’t last long as Mayor Jerry Sanders’s real estate czar.

The information on Waring ran in detail in the Reader in early 2006. San Diego’s leaders, always friendly to moneybags, didn’t appreciate the story.

I had no idea La Costa was Mob financed and some of the big wigs used to hang there.

The last San Diego story I heard that was mob related was that mob guy from Chicago-Petite or something similar-and this was when the Indians were just starting to open their casinos in the last 80's and this guy was trying to infiltrate them.

Response to post #7: The Teamsters were once one of the largest private land owners in San Diego County. Before La Costa, Murrieta Hot Springs was a big mob hangout. Irvin Kahn, who was connected with mobsters, tapped Teamsters money for development. It was kept quiet by local media but out-of-town publications like Penthouse, Life Magazine and the Wall Street Journal would probe San Diego's corruption. Best, Don Bauder

Response to post #1: A lot of dirty money has poured into San Diego environs through the years. La Costa, Penasquitos, and Murrieta in Riverside County. Then there's the laundered drug money from Mexico that has gone into San Diego real estate. That's a different story and one that has barely been covered. Best, Don Bauder

Response to post #4: I don't know if laundered money is going into those Otay homes. In any case, they are being deserted quite rapidly. I didn't know there was still building going on. Best, Don Bauder

I am personally grateful for the "printer friendly" link. I have put it to use.

We can't even begin to solve the problems of this city as an informed electorate until we understand exactly who we are as a community of residents, influenced by an apparently much larger community of investors -- good and bad -- who see "opportunities" here that we provide to them on a regular basis.

Given your writing above, the announcement today that a City of San Diego Redevelopment Agency director who sits on our City Council (and was acting mayor while three other councilmembers were indicted/convicted/died in office as a result of a federal bribery probe) is now married to a Centre City Development Corporation board member, where both redevelopment agencies are involved in unsupervised loans from the City of San Diego totally $250 million or more, all makes perfect sense to me.

I had no idea that the newlyweds had been dating for the last seven years, while these loans from the people of San Diego were being made without the City Council making any effort to demand repayment.

Ordinarily, who dates/marries who is something I consider beyond me, but this looks like a political marriage of convenience to keep somebody from later testifying against somebody else.

The fact that this union was apparently vetted by the Ethics Commission... well... hell...

I only hope I live so long to get cut in on this deck of "Get Out of Jail Free" cards...

It's not just Jennifer and Toni who are hitched...seems we're all married to the mob here in San Diego, and getting a divorce looks dicey.

Don Bauder, who has been measured for cement boots more than once, and Matt Potter, who once had a dead fish with his name on it delivered to the Reader office, are two of the most courageous journalists in San Diego. They're too often alone in their willingness to lift up the paving stones and see what scuttles around in the dirt underneath. For this public service, they have been belittled, locked out, distrusted, and cursed by the establishment.

If we stand any chance of cleaning up this town, it will be because the Reader, Voice of San Diego, and City Beat had the fortitude to stand up to the entrenched few who think they own this town. That the UT would once again distort the truth to protect their blood-brothers is no surprise at all.

As to getting a "get out of jail free" card, those are reserved only for officials at SEDC and CCDC, as well as members of the City Council who put their fingers in the cookie jar.

Response to post #11: I must say I get a chuckle when I hear one of the faux capitalists intone, "We believe in free markets! Free enterprise! We oppose government interference in business! The Fed's putting $29 billion into the JP Morgan takeover of Bear Stearns was brilliant! The Fed's taking doggy mortgages from lending institutions and replacing them with Treasury paper was wonderful! The Fed's opening the loan window to investment banks was capitalism in action! The seizing of Fannie and Freddie was American capitalism at its best!"
Huh? It's like Republican candidates running against their own party, and the public swallowing it. Best, Don Bauder

Don you are too cool for school! I'm sure glad I met you when you were at the Del Mar Fairgrounds in the U/T exhibit before you retired! You probably shook a lot of hands that day, but I was glad to meet you. My family and I have been following your stories since the beginning of the 1980's. Have a copy of your Captain Money & The Golden Girl book in my library.

We should've figured out those were our "blighted area" choices when we all got the 1000-foot-radius lulling letter in the mail nearly a decade ago. It came from the public utility's corporate agent, saying that everything had been inspected and permitted as safe and non-toxic... then the birds started falling out of the sky.

Some of us got ill... at least one of us ended up in the hospital for breathing problems... but none of us actually died, and in Southeast San Diego, that's considered to be "good health."

We had our first hint of how really bad things had been for us humans when someone in the County Counsel's office was quoted in our city's distinguished daily paper five years later. She had gotten reports of "tons" of debris which she described: "Our inspectors found asbestos debris everywhere. Dust was flying in the air. It looked like shaved chocolate." http://www.signonsandiego.com/news/metro/20050831-9999-2m31lgsuit.html Too bad they were allowed to see what had been blocked from the neighbors' eyes, and mine as well.

When neighbors did go to testify at the federal criminal trial almost two years later, after nearly 7 years of exposures... well, maybe I'll just post the link to the judge's order for a new trial after last year's GUILTY verdicts.

There is a nice selection of letters from various state and local public prosecutors' offices dating back to 2001, and the US Attorney's press release on the 2006 criminal indictment lists our local Air Pollution Control District as an investigative agency. Casey Gwinn's office said my information would "be recorded and included in any future investigation of" the utility or its corporate parent by the City of San Diego. Dianne Jacob, serving on the APCD board, is most likely the person behind the earlier County Counsel suit; she described the utility as a "bad actor" in a recent LAFCO meeting involving the 16-acre lot in question.

With all of the "reasons" for Carol Lam's departure as USA in San Diego, no article has ever mentioned this issue in the pre-trial phase involving the major local asset of a top 100 Fortune-mentionable corporation that has in the last few weeks just raised its dividends. Until I was finding actual court documents or reliable summaries on asbestos and power-related websites, I had been pretty good about keeping quiet about the whole thing, waiting perhaps too patiently to hear back on the DA's 2001 promise of eventual prosecution after what the ADA did assume would be a lengthy investigation.

I blogged earlier this summer that a utility-state Voluntary Cleanup Agreement (that produced no cleanup) has probably been used to silence other state agencies, especially a related Regional Water Quality Control formal enforcement letter regarding storm water discharge info from the utility. It's amusing that the Water Quality violations were never admitted into the VCA study that was going on at the same time...

My blog photo (Encato Gas Holder) is of storm water discharge from the site in March 2008, years after the VCA results came back from the utility-supplied site samples saying "No Asbestos Found"... the samples mentioned in the federal court order found at the link in #22 above seem to contradict that VCA finding.

It is my understanding that some, including Erin Brockovich, may be following this whole mess from a safe distance away. At least my neighbors have tried to make her aware of it...

So what are the results of a tainted VCA with a guilty federal environmental crimes defendant actually worth?

That's what we want to see in state court.

At least that was my intention until I was blown away by your writings above... Sincere thanx for opening my eyes!

When neighbors did go to testify at the federal criminal trial almost two years later, after nearly 7 years of exposures... well, maybe I'll just post the link to the judge's order for a new trial after last year's GUILTY verdicts.

I have no complaint about Judge Sabraw. In fact, I see him whittling down the defendants' future appeal issues in a case where government prosecutors have been handicapped by (1) old federal regulations that restrict the government's ability to test debris for regulated asbestos containing material, (2) the same regulations adopted under federal rule-making to use essentially outmoded science that undercounts the smallest asbestos fibers to defendants' advantage (at least one recent law review article was published because of these two issues in this case), and (3) an absence of other guiding case opinions in the relatively new area of National Emissions Standards for Hazardous Air Pollutants (NESHAP) law that would make nailing down this case just that much easier. Judge Sabraw has moved delicately in his orders to avoid the appearence of "legislating from the bench"... or at least that's my otherwise-ignorant no-law-school take on things.

The federal agents, investigators and prosecutors have been and remain my heroes in this. In the neighborhood, make that "our heroes." More than a few of us have the FBI on speeddial, and among us all, we only have nice things to say... because those nice things are deserved.

In a way, it's kind of like watching the Chargers in the early part of the season. There are no blowout losses, and we're just waiting for the rest of what should be a winning trip to post-season play.

I included it because of Judge Sabraw's summary of the asbestos content of a sample (collected by the main defendant in the federal environmental crimes trial) that came in at over 50% asbestos. Other asbestos-contaminated samples were similarly described in the judge's new trial order.

Obviously, the defendants would prefer that these sample results not be known, except that challenging the judge's order might mean that the public utility et al could be paying million$ in fines right now with individuals serving felony time... instead of waiting on a new trial or reinstated guilty verdicts on appeal.